BIM35501 - Capital/revenue divide: intangible assets: overriding statute law

Provisions overriding the capital/revenue divide for intangible assets

There is a growing body of statute law which overrides the relevance of the capital/revenue divide for the purpose of computing profits under Cases I and II of Schedule D (and for other computations of income). Under these provisions capital receipts and expenditure are normally brought into the computation of trading profits etc in accordance with their accounting treatment.

In the field of intangible assets FA02/SCH29 applies this approach to most accounting entries in respect of goodwill, intellectual property and other intangible assets which (subject to exceptions):

• are held by companies within the charge to CT,
• are regarded as fixed assets for accounting purposes,
• fall within the scope of FRS10, and
• are created on or after 1 April 2002, or
• are acquired from an unconnected party on or after that date.

For two classes of assets - telecommunications rights and licences within FA00/SCH23 and syndicate capacity at Lloyd’s - the intangible assets regime applies from 1 April 2002 even if the asset pre-dates the intangible assets regime.

Detailed guidance on the rules in Schedule 29, including the commencement provisions, is in the Corporate Intangibles Research & Development (CIRD) Manual.